Doha Round, the perpetual negotiation at the World Trade Organization

More than a decade after the first negotiations about the Doha Development Round, the agreement is still suspended. Several key issues are at stake in this Declaration, where lowing trade barriers, dealing on agricultural subsidies or improving trading conditions for the least developing countries are the most controversial factors for a multilateral agreement among World Trade Organization´s members.

Amid the current financial crisis, Kieth Rockwell, World Trade Organization (WTO) spokesperson, explains this lack of consensus is due to the reluctance of politicians to take risks. “The appetite for further trade opening diminishing when there are difficult economic conditions”, Mr. Rockwell pointed out in a conference hold at City university in London last 22nd of November, 2012.

There has been a rise in the number of trade restrictive activity that have been applied during the financial crisis. “In 2009 trade collapsed, contracted by 40% (the biggest contraction in trade since the Big Depression). However, a year later trade rose again by more than 20%”, because markets stayed open, specifies Mr. Rockwell. In accordance with this, the Dispute Settlement is a system which deals with these trade frictions. This 2012, WTO has seen “an increase of more than three times in the number of dispute settlement cases brought into the WTO”, as Mr. Rockwell announces.

This rise of trade fictions is a consequence of two elements: the economic situation and the power shift. Since China entered the WTO in 2001, the number of dispute cases has increased. Why? Power is shifting from West to East and it has been accelerated by the crisis. What matters here is that the U.S., China, EU and Japan are the world´s biggest trading nations. China is the second largest importer and exporter and it faces more trade frictions. According to Mr. Rockwell, as long as cases are coming to the WTO dispute process “is a good thing” since -Mr. Rockwell continue- “its a forum in which all types of trade can be discussed”.

However, inside the Doha commitments, there is one particular issue that have been proved irresolvable until the moment; agriculture. Agricultural subsidies and agricultural market access (mainly tariffs) are perhaps the most complicated things to solve. The WTO focuses on trade distorting subsidies. Mr. Rockwell specifies that, “there are means of supporting agriculture which are less distorting than others”. Encouraging production, for example, is what is called “trade disturbing”. Why? Because if a developed country has a super-plus production, it might sell it to a third developing country and hurt its economy.

Inside the WTO, there is a coalition of developing countries; the G-20 (not to be confused with the G-20 group of finance ministers) that tries to pressure the developed states to reform their agricultural practices, providing some flexibility for the poorest economies. This last October 31st, the WTO Director-General, Pascal Lamy, said in the G-20 trade measures report that those economies slowdown pressures on trade restrictive barriers. Although, the uncertain economic situation has made negotiations stalled.

The Doha Development Round has focused mainly on improving conditions on the developing countries. But, what has it delivered for them up to this point? Sincerely, as the WTO spokesman affirmed, little progress has been made since 2008 because they do not have agreements. Here it comes the problem of security and, lets be honest, corruption; that makes more difficult to build business there. Mr. Rockwell clarifies at this point that developing countries have to find what they call “needs agreement” to identify what they need to do to implement any agreement, as for example improving border crossing points or infrastructure. “There are a wide key issues that are important to them and we have to identify these needs and see how much will cost for them”, describes Mr. Rockwell.

This means that “trade is not a good thing all the time for everybody”, as Mr. Rochwell manifests. There are trade downsides because least developing countries need special protection,  they are fragile and their trade infrastructure is poor. The disadvantage is that they do not have the same competitive capacity to deal with free trade. Therefore,  as WTO spokesperson revels, “it all depends on each country and the country´s economic activity”. There are many factors that have to be taken into consideration, as the level of development or competitive system, to achieve fair trade, and not only free trade.

In relation to these problems, the last Public Forum (September 2012) discussed the failure of governments to reach agreements under the threshold if multilateralism can be delivered. Anabel González, Costa Rica’s Minister of Foreign Trade emphasized that, “We need to revitalize the multilateral trading system in the WTO” to be able to find global solutions for global problems as the global warming, finance or security. In the same way, Eduardo Pérez Motta, Chairman of Mexico’s Federal Commission on Competition stated that, “We are in a time of challenges […] and I think we have to reflect how the international trade system has to move forward”. The question is, can this be done in the Doha Round, or perhaps it is necessary a more open-creative path to redefine the current problems?

Editorial
What are development and developing countries defined?

The Doha Round is also known “semi-officially” as the Doha Development Agenda, since developing countries’ needs and interests are at the heart of this Declaration´s programme. It also includes the United Nations Millennium Development Goals (MDGs) which are eight objectives to achieve by 2015. Mr. Rockwell says, “in the most important areas, as reducing poverty, […] or access to drinking water, the goals have been met already well ahead the schedule [...] And to some extent, trade has been a key player in countries like China, Chile, India or Brazil”.

G-20 developing group includes countries as Egypt, India, China, Argentina or Nigeria. There is a question that arise here such as; can all these countries lump together into the same category? I do not think so, since there is a wide range of differences in development among countries. Therefore, how do you define development? Is China still considered a developing country? Probably not. The group of countries defined as BRICs (Brazil, Russia, India and China) have advantage over other poorest countries that need special and differential treatment.

UNICEF data shows that “more than 30 per cent of children in developing countries – about 600 million – live on less than US $1 a day”. Are then the objectives being met? There are many countries that still live under the threshold of poverty. Ghana, for example, is part of the WTO since 1995 but it is not included on the G-20 developing countries. Its main exports are gold, cocoa and timber. However, “14,000 people died of AIDS in Ghana in 2011”, according to its official website. And there are many other countries in this situation. This makes me think, is free trade fair for them? We need to be aware that natural resources are found in some of the poorest countries. Therefore, there is something that someone is not doing totally fair to still allow that.

Another pot hole for the Spanish economy

The nationalization of the oil company YPF (Fiscal Oilfields) by the Argentinian government put Spain in the cross-hairs once again at a time when the benchmark index of the Spanish stock exchange (IBEX 35) has toppled more than 2%.

The expropriation of the shares owned by the Spanish subsidiary Repsol has taken place due to a “Decree of Necessity and Urgency”, according to Argentina's President Cristina Fernandez de Kirchner. This action has mangled the relationships between the two countries. The Spanish Industry Minister, José Manuel Soria described the measure to expropriate 51% of company shares as “hostility against interests and against Spain”.

Antoni Brufau, chairman of Spanish oil company Repsol, a company that owns a 57.43 percent stake in YPF will call for compensation in international arbitration. He also said that the expropriation of YPF is illegal and announced he is willing to sue Buenos Aires in a hearing to settle the dispute in the World Bank (WB).

The Argentine government´s decision has caused Repsol YPF stocks to take a sharp downturn due to the uncertainty of the situation as a result of the Argentine´s government cutting subsidies and the call for the expropriation of the 51% shares held in IPF. The Argentine government's plans are spurring stock volatility both in New York and Madrid Stock Exchange. Argentina has splintered the “trust with Spain and the international community”, according to Foreign Minister Jose Manuel Garcia Margallo. Speculators allude to an area in the south-west of Argentina called “Dead cows” region, where a new stockpile of oil was found, as one of the reasons this law was decreed.

The Argentinian oil company IPF has a long and diverse history since its creation in 1922. In 1992 during the administration of President Carlos Menem (1989-1999) Repsol bought out $15bn worth of shares saving the company from bankruptcy.

The new Argentinian President Kirchner refuses to pay $10bn to the Spanish company Repsol arguing that expropriation is a measure “according to the law and guidelines established by the Constitution of Argentina”. The confrontation amid Respol IPF´s nationalization and Kirchner´s government could necessitate intervention from the international finance community and could be a setback in the Argentina´s economic situation. As Wall Street shows YPF stocks topped the list of biggest percentage price decliners among common stocks on the New York Stock Exchange at the close of April, 18th with a -11.16% ADS.

The Spanish population is highly torn from the latest labor reforms put into place by the new right-wing government coupled with civil unrest in the society. Accompanied with the underlying weakness of Spain´s Banks, it is hard to wonder if Argentina has not just hammered another nail into Spain´s coffin.